Sucheta Dalal :IPOs continue to post gloomy results
Sucheta Dalal

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IPOs continue to post gloomy results  

April 23, 2010

The performance of IPOs continues to be plagued with problems. Once again, new public issues of several companies have taken a nosedive after listing. In the past few weeks, about 14 new stocks have listed on the bourses, out of which eight are now trading below opening price; while others are barely trading at par.

Real-estate developer DB Realty opened at Rs452 on 24 February 2010. It is still trading flat at around Rs450 as on 22st April. Emmbi Polyarns, manufacturer of polymer-based products, got listed on the same day as DB Realty. It is now down a whopping 56% at Rs20 per share.

Cable television services provider Hathway Cable & Datacom too shares the same fate. After listing at a premium of Rs10 to its issue price, it is currently trading at Rs215, down 14% from its listing price.

ARSS Infrastructure Projects is the only stock to have posted healthy returns since listing. This stock listed at a whopping 42% premium to its issue price. It is now trading at Rs1,296, up 103% from listing price. However, market sources said that the gains are mainly due to interested buying which has had an enormous impact on the price because of the small floating stock.

Among the other significant underperformers are Texmo Pipes & Products, DQ Entertainment (International), Pradip Overseas and Shree Ganesh Jewellery House. Texmo is trading at a 27% discount to its listing price, while DQ is floundering at 19% below its listing price.

Pradip Overseas, which listed on 5th April, is down 25% while Shree Ganesh Jewellery House has taken a severe beating, down 44% from its listing price.

Stocks like Man Infraconstruction (up 6%), United Bank of India (up 1%), IL&FS Transportation Networks (up 1%) and Persistent Systems (0%) have barely inched above their respective listing prices.

However, some of these stocks have posted decent gains on their issue prices such as Persistent Systems (up 29%), Man Infraconstruction (up 40%) and DQ Entertainment (up 37%).

Two of the latest public issues have exhibited the same trend. Intrasoft Technologies, which listed on 12th April at Rs150 is now trading down 15% at Rs127. Goenka Diamond & Jewels opened on 16th April and has since gone downhill (-18%).

Such erratic performance is the main reason why retail investors are still shying away from the primary markets. Several of these public issues took place at a time when the stock markets were on a strong bull run. Even at such times, if public issues fail to deliver results, then one can’t blame the investors for not showing interest. Indeed, IPO performance is now completely determined by the interplay between the short-term market condition, greed of the promoters and aftermarket speculation. Given the fact that these factors put together can never ensure a rational offer price and traded price, retail investors are likely to stay away even more in the future.— Moneylife Digital Team


-- Sucheta Dalal